Mad Money's Jim Cramer on CNBC: Cramer Explains What's Key to This Market - CNBC

Cramer on Tuesday marveled at how the market continues to push higher despite a long list of negative economic news.

"For the first time in a long time we're witnessing true bull market behavior where buyers don't scare easily and are willing to massively overpay anything with growth," Cramer said. "There's a shortage of, well, fright."

Consider Chipotle Mexican Grill [CMG 266.12 8.16 (+3.16%) ], which has seen shares soar. Investors continue to pay 39 times earnings for the stock, even though one would think it's dependent on consumer confidence, housing, net worth and lower gas prices. Yet the stock continues to go up. So long as Chipotle has earnings momentum, Cramer thinks growth-orientated hedge funds will continue buying shares. The second it loses that momentum, however, he expects the stock to fall sharply.

"Chipotle just won't go down, won't take a dive because that's what happens in a bona fide bull market," Cramer said. "In every bull market I've ever seen there have been anointed stocks, stocks that can do no wrong, stocks that make no sense to anyone but the people who buy them."

This rally is not about Chipotle, though. It's about the mechanics of the market. When it comes to fast food operators, Cramer would rather own McDonald's [MCD 75.37 0.37 (+0.49%) ], but he respects the buying power. That's important because in this market, money mangers don't care about price-to-earnings multiples. They care about growth. Hedge funds care so much about growth that they are willing to pay up for it.

"Recognize the power not just of the growth story, but of the undeterred buyers who are about to get a whole new influx of cash to propel Chipotle and other momentum names ever higher," Cramer said. "That's the key to this market."

Stock Market and Investing: Jobs on the Horizon as Market Drifts Higher Into Quarter-End - CNBC

Markets are already looking ahead to Friday's March jobs report as the next directional driver.

Stocks Tuesday floated higher in thin volume trading, with the biggest gainers the telecom and energy sectors. The Dow was up 81 at 12,278 and the S&P 500 was 9 points higher at 1319.

The dollar was also higher and bond prices were depressed, in part on comments from hawkish Fed officials that suggested the Fed should end its easy money policies sooner rather than later.

"It all comes down to Friday and the non-farm payrolls," said Boris Schlossberg of GFT Forex. "What if it comes in at 120,000, or 130,000, and unemployment goes back up to 9 percent? There's going to be a tremendous amount of resistance on the part of the FOMC to give it up." Economists expect about 200,000 jobs for March.

Dollar-yen was also higher Tuesday, surpassing the levels it hit after G-7 central banks intervened against the yen March 18.

"Since Plosser and Bullard, we have had 150 point rally. You can call this the second intervention — the Plosser-Bullard intervention," said Schlossberg. He was referring to Friday's comments from Philadelphia Fed president Charles Plosser and St. Louis Fed President James Bullard's comments, made today and over the weekend.

For Wednesday, investors are watching the ADP private sector payroll report for signals about Friday's jobs report. It is released at 8:15 a.m. The Challenger jobs report is released at 7:30 a.m. There is also another Treasury auction at 1 p.m. of $29 billion in 7-year notes. Wednesday's Fed speakers include Bullard, who is in London, and Kansas City Fed President Thomas Hoenig, who also speaks in London before the New York market open.

While bonds saw selling, stocks rose with little explanation Tuesday. Traders in the stock market dismissed comments from Bullard that the Fed could cut short its quantitative easing program. But the stock market has also ignored more trouble for banks in Europe and Japan's problems with its leaking nuclear power plant.

Another potential negative for stocks was the consumer confidence report but the market moved past it. As gasoline prices rose, consumer confidence fell to a weaker than expected 63.4 in March, after hitting a three-year high of 72 in February.

"Black swans are swimming in flocks now," quipped Jack Ablin, chief investment officer at Harris Private Bank. Traders have expected stocks to move higher into the end of the quarter Thursday, as portfolio managers shuffle holdings.

"One of the metrics we use is cash on the sidelines, and it's still nearly 25 percent of the capitalization of the stock market that's sitting on the sidelines in cash...that could be filtering in. Every day this goes on, it might be convincing these retail investors to be in there," said Ablin.

"Everyone's bemoaning the large government involvement, but that's what's keeping this going," he said. "We're getting pretty cautious here."

Earnings reports are expected Wednesday from Family Dollar [FDO 52.40 1.00 (+1.95%) ] and Signet Jewelers [SIG 44.80 0.85 (+1.93%) ]. Mosaic [MOS 78.85 1.18 (+1.52%) ] reports after the closing bell.

In Washington, the House Financial Services' Oversight and Government Reform subcommittee meets on TARP. The Senate Appropriations Energy and Water subcommittee holds a hearing on nuclear safety.

The Senate Committee on Agriculture, Nutrition and Forestry meets on high gasoline prices, and the House Financial Services Oversight and Investigations subcommittee meets on the cost of implementing Dodd Frank

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Why Won't the Fed Accept A Profitable Deal From AIG? - CNBC

For months, the Federal Reserve has insisted it has an exit strategy in place and has all the tools necessary for reversing the extraordinary monetary policy put in place during the financial crisis.

But now, faced with a formal offer to exit at a profit from one of the thorniest crisis-era holdings on its balance sheet, the Fed has remained silent and seemingly without a strategy.

AIG has come forward and offered $15.7 billion for the residential mortgage-backed securities in the Maiden Lane II portfolio. These assets were taken by the Fed in the darkest days of the AIG [AIG 36.55 -0.40 (-1.08%) ] bailout to secure a $22 billion loan that was part of the broader bailout.

The assets, mostly subprime residential mortgage-backed securities, have paid off and kicked off interest income while the loan has been paid down to the point where just about $14 billion is outstanding. So the $15.7 billion offer from AIG would mean the Fed would clear about $1.5 billion in profit on the assets.

The Fed could be excused if the offer had only just been made. But, in fact, the idea of AIG taking back these assets has been out there, in one form or another, since at least September. AIG has been busy raising money for what would be one of the biggest RMBS transactions since the financial crisis.

And yet, the Fed acts like it’s the first time it’s heard of the offer.

AIG CEO Robert Benmosche, in an interview on Squawk Box this morning, said he had still not heard from the Fed on its 10-day-old formal public offer to buy the Maiden Lane II portfolio. AIG had also not heard from the Fed on its behind-the-scenes offer to buy the assets in December.

Both the NY Fed and the Board of Governors in Washington declined numerous interview requests from CNBC to explain its thinking behind the AIG assets.

Fed watchers said they thought it made sense for the Fed to get these non-conventional assets off its book at the earliest opportunity. One source said he found Fed ownership of AIG subprime so troubling that he believed the central bank should unload them at almost any price, let alone at a profit.

Lou Crandall of Wrightson ICAP, said: “If I were the Fed, I would cash out and close the books.” He added that he would be happy to hear anything from the Fed explaining itself and, in an email, provided reasons that he thought could explain the Fed’s actions. He added that he barely believed his own reasons.

First, he said, the Fed may see it as premature to sell assets from a monetary policy stance. But then Crandall added, “I cannot imagine they think a transaction of this size would have macro implications.”

Second, he thought the Fed might think it will make more money by holding the assets. But then Crandall added that he’s pretty sure (as am I) that the Fed thinks such considerations shouldn't motivate a decision.

What has been especially frustrating to one person familiar with the matter is that taxpayers make out either way, and may do better if the assets reside on AIG’s books. Taxpayers own 92 percent of AIG, so let’s say theoretically that AIG underpays the Fed for the assets.

Taxpayers would capture all the upside by virtue of their equity ownership in AIG. What’s more, a dollar of interest income on the books of the Fed is worth only a dollar. A dollar of interest income on the books of AIG gets a multiple when express in stock value. Taxpayers will realize those multiples when and if the US treasury’s position is sold, perhaps as early as this spring.

This person thought, "They (the Fed) are just paralyzed on this question because they have been so beaten up by AIG."

There are those who believe the Fed should auction the assets and maximize the value. Word that Barclays [BCS 18.85 -0.10 (-0.53%) ] and others may be now be interested creates the possibility of a bidding war that could ring the last penny of value out of the assets.

The Fed would, of course, have egg on its face if the values came in lower than the AIG offer, but it’s reasonable to assume the offer in the table would be a floor. Still, the question is why a Fed that has been reasonably diligent about thinking about and even testing innovative strategies to unwind its easy monetary policy seems to blindsided by the question of how to handle the AIG offer for Maiden Lane II.

What’s clear is the controversy over what the Fed took onto its books from AIG has now changed into the conflict over what the Fed takes off its books from AIG.

Stock Market and Investing: Lookahead: Euro Crisis Bubbles Up Again - CNBC

Europe's sovereign debt crisis is bubbling up again -- as if investors don't have enough to worry about.

Stocks were relatively quiet Tuesday after Monday's big swing higher. The Dow [.DJI 12018.63 -17.90 (-0.15%) ] finished down 17 at 12,018, and the S&P 500 [.SPX 1293.77 -4.61 (-0.35%) ] slid 4 to 1293. The defensive utilities and telecom sectors were the only Standard and Poor's industry groups in the green, on a day that Reuters reports was the lowest trading volume day of the year.

But in the euro zone, spreads on peripheral sovereign debt were trading wider and credit default swaps, which reflect the price of insuring debt, went shooting higher.

On Wednesday, Portugal's parliament is scheduled to vote on a new austerity budget, which opposition parties have said they will not endorse. Prime Minister Jose Socrates has threatened to resign if the budget fails, raising the prospect of a government collapse and an IMF bailout. The vote comes on the eve of an important European Union summit Thursday where leaders are expected to agree to programs aimed at the sovereign debt crisis, including strengthening of the emergency funding mechanism.

In the U.S., Fed Chairman Ben Bernanke speaks to the Independent Community Bankers of America convention at 12 p.m. ET. New home sales are reported at 10 a.m., and traders are watching for EIA oil inventory data at 10:30 a.m.

Investors are also watching events in the Middle East and Japan's efforts to solve its nuclear crisis. Egypt's stock market was expected to reopen for the first time since the government was overthrown.

On Tuesday, the U.S. Food and Drug Administration banned food imports from the area of Japan affected by the leaking Fukushima Dai-ichi nuclear facility, and Japanese press reports said the Japanese government estimates quake related damage at $185-$308 billion.

Euro Zoned

Ireland joined Portugal in the spotlight Tuesday as rumors, later knocked down, circulated that it would not meet its debt payments.

The dollar was just slightly weaker against the Euro [EUR= 1.4162 -0.0037 (-0.26%) ] (1.4199) and slightly stronger against the Yen [JPY= 80.90 -0.07 (-0.09%) ] (80.9061).

"To me there's a disconnect here in terms of what certain assets are telling us in Europe, when contrasted with the apparently unrelenting strength of the euro," said Michael Moran, Standard Chartered senior foreign exchange strategist. "There is a conflict. I think at some point there will be a convergence and ultimately I think the euro will be the casualty, but this could take multiple months to really play out."

Moran said the November high of 1.4282 is in play as the next level for the euro currency. "That is really the level people are gunning for now," he said. "...On the one hand the debt perception of the European periphery has arguably worsened over the last 12 to 18 months, yet the euro is strengthening."

Moran said failure of the Portuguese government would be a "fresh negative" for the euro, and the rumors about Ireland, which were propelled across world markets by Twitter, is a reminder that there remains structural issues in the euro zone. He added that the stronger message might be that this is a period of dollar weakening, rather than euro strengthening.

"There's two central pillars of support. One is Germany and its outperformance, and the other is the insistance from (European Central Bank President Jean Claude) Trichet that tightening is the best course of action," he said.

"If one take a macro view in the next six months, the euro does look a little too strong in that sense. But if you're a trader, especially over the last two or three weeks, you have to be cognizant that the momentum really has been with the euro bulls, and it's been very expensive trying to fade these moves higher in the euro. But I think there is some inconsistencies and conflict, which suggest sentiment might still have a glass jaw, but it's very difficult to really go against the under lying momentum now," he said.

Oil Drill

Oil was a big gainer on the day, with the May contract for WTI Crude [CLCV1 105.23 0.26 (+0.25%) ] rising 1.8 percent to settle at $104.97 per barrel, as traders watched the conflict in Libya and tensions in Yemen and Syria. Yemeni President Ali Abdullah Saleh refused to give in to opponents who demanded he quit, as he continued to lose support from one-time backers.

Traders are watching for EIA supply data, following the API's report that showed a 970,000 build in U.S. crude stocks, well below the 1.6 million barrel increase expected by analysts.

"It's a very nervous market.. If the wrong thing happens. it could take out the highs we knew in 2008 in a blink," said Ray Carbone, president of Paramount Options.

While oil rose in reaction to Middle East events, Treasurys slid, with the 10-year Yield rising to 3.334. Gone was the flight-to-safety bid of last week, when markets reacted to fears that Japan's nuclear crisis would continue to worsen.

"It's right now immune to any of the external forces. You've got the market trading momentarily on the Fed purchases. This week we had an onslaught of corporate pricings. So in the morning, you get the hedging of the product, and in the afternoon you get the pricings," said Jefferies Treasury strategist John Spinello.

There was $13.65 billion in investment grade corporates issued Tuesday, including most of a $7 billion 6-part trade for Sanofi-Aventis' acquisition of Genzyme. Dupont also came to market with $4 billion for its acquisition of Danisco, according to Thomson Reuters IFR. So far this week, $19.3 billion has priced, compared to just $6.85 billion last week as issuers held off a the Japanese and Middle East events dominated market attention.
Spinello said the overnight Tuesday was affected by strong U.K. inflation data, which drove Sterling [GBP= 1.6355 -0.0017 (-0.1%) ] higher against the dollar. "The question is who goes first," in terms of tightening monetary policy, and the market could become concerned that the Fed is lagging in tightening, he said.

Citigroup Dividend: Citi to Resume Dividend, Sets Reverse Split - CNBC

Citigroup said it plans to reduce the number of common shares outstanding and will reintroduce a dividend after suspending payouts two years ago.

Many of the biggest U.S. banks on Friday announced dividend hikes after the Federal Reserve completed a second round of industry stress tests.

Citi [C 4.54 0.04 (+0.89%) ] said it will shrink the number of common shares through a 1-for-10 reverse stock split and start paying a quarterly dividend of 1 cent per share in the second quarter.

The reverse split will reduces Citi's outstanding common shares to 2.9 billion. No fractional shares will be issued.

The reverse split will take effect after the close of trading on May 6.

"Citi is a fundamentally different company than it was three years ago," Chief Executive Vikram Pandit said in a prepared statement. "The reverse stock split and intention to reinstate a dividend are important steps as we anticipate returning capital to shareholders starting next year."

Stock Market and Investing: Yen Hits Record High on Dollar; Will Central Banks Intervene? - CNBC

The yen rallied to a new all-time high against the dollar as traders speculated G-7 central bankers may getting ready to intervene to drive the currency lower.

Japanese Finance Minister Yoshihiko Noda said early Thursday that he is closely watching foreign exchange markets, but he declined to comment on intervention. He said there have been nervous moves in thin markets.

Just before 5 p.m. New York time Wednesday, dollar yen broke through the 79.75 level and continued to tumble to as low as about 77. Reuters reported that the G-7 finance ministers are expected to hold a conference call Thursday evening New York time to discuss the crisis in Japan.

"It was testing the all time low, testing, testing. Then it went though it. It was just like an air pocket really. It just went crunch right through," said Deutsche Bank chief currency strategist Alan Ruskin. "The absence of the central bank has been stunning actually."

The yen [JPY=X 79.20 1.54 (+1.98%) ] has been rising since the 9.0 magnitude earth quake struck Friday, on speculation that Tokyo would be repatriating yen to pay for the damage. The uncertainty about Japan's nuclear crisis has caused even more speculation, as investors watch the struggle to control damaged nuclear reactors at the Fukushima Daiichi power plant.

"The irony is the worse things get in Japan, the stronger the yen gets," said Boris Schlossberg of GFT Forex. "I don't think it ends unless the central bank comes in and intervenes. There's so much sentiment on the side of long yen that it's going to take a lot of capital to push dollar yen back up. The one thing I can assure you of is this is going to be a very volatile night."

The dollar has periodically attempted to strengthen against the currency but it has largely been lower in the last several days. "It really raises the question of how much the central bank is really functioning. There might be other factors at play. I think you have to be a little wary. G-7 has a conference call. I can't imagine these guys are going to let this thing go into freefall," said Ruskin.

"If there was any time for coordinated intervention it would be now," said Ruskin.

At the same time, the Swiss franc [CHF=X 0.9023 0.0035 (+0.39%) ] was making new highs against the dollar in early evening trading in a flight-to-safety trade. "It's a kind of straight forward 'all hell's breaking loose' between the Middle East and Japan," said Ruskin.

Currency markets also were rife with rumors that the Tokyo Stock Exchange wouldn't open for trading on Thursday, which the exchange denied.

Stocks & Investing - Wednesday Look Ahead: Rally Turns Two as Europe Sovereign Woes and Oil Combine to Test It - CNBC

Wall Street's bull enters its third year with a furrowed brow.

Tensions in the Middle East, and the resulting run up in oil prices, combined with seemingly unending worries around Europe's weakest sovereigns are powerful hurdles facing the young bull. But many analysts and traders think those problems are temporary, and the market can continue to climb on stronger economic news and earnings gains.

However, they are also watching the next series of obstacles, including how elected officials tackle the growing federal budget deficit. There is also the Fed's ultimate unwind of its easy money policies that have helped juice the stock market's gains. The Fed is due to end its quantitative easing program in June, and the risk then will be how stocks react in a rising rate environment.

The Dow Tuesday rose 124 points, or 1 percent to 12,214, while the S&P 500 was up 0.9 percent at 1321. The Nasdaq was 0.7 percent higher at 2765. Stocks were lifted along with bank shares, which surged about 2.8 percent after Bank of America said it hoped to raise its dividend and carry out share buybacks.

Tech stocks were late day movers and could weigh on Wednesday's market. Fiber optic component maker Finisar tumbled more than 30 percent after it issued a disappointing forecast and said China demand was slowing. That comment smacked other companies in the space, including high-flier JDS Uniphase, which lost 13 percent after the bell. Texas Instruments, in a less spectacular move, also lost ground in late trading afterit narrowed its guidance and said that demand for chips for televisions remains weak.

Baby Bull

Stocks two years ago Wednesday troughed as fear pervaded the markets and economy. The S&P 500 closed at 676 that day, well off its 2007 high of 1565, and blue chips traded at fractions of their current value. Since then the S&P has nearly doubled.

"I think it is interesting that on the two year anniversary, we've still got something on the list to perpetually worry about, and why you should be bearish," said James Paulsen, chief investment strategist at Wells Capital Management.

Oil is one of those worries. Bubbling crude prices have weighed on the stock market since rebellion erupted in Libya last month.Oil prices slipped slightly, falling below $105 per barrel as talk that OPEC would ramp up production to make up for Libya soothed markets. Meanwhile, the fighting in Libya continued and Muamaar Gaddafi's forces seemed to gain ground against the rebels.

"This is eluding me," said veteran trader Art Cashin of the stock market's rally Tuesday. "If they're not rioting in the streets, we go up, and if oil rallies, we go down."

Cashin, director of floor operations for UBS, said the two year anniversary of the market's bottoming is not particularly important as a milestone. "It's kind of like a 37th wedding anniversary. It's pleasant to remember, but doesn't have a great deal of impact."

Paulsen said the negativity from oil prices and Europe's woes will probably prove a positive for stocks, which had moved higher in an unchecked fashion for weeks. "I think if anything, I'm moving the other way. Here's what we've done. We've caused a little pause in this...We've marked some time and while we've bought some time, the fundamentals moved up again," he said.

Yet oil is a concern and the Middle East is an uncertainty. "We don't have a shortage of energy. What we've created is the fear of a shortage of energy," he said. Paulsen points out that rise in oil has paralleled a decline in some other commodities, like grains and copper, and that could help alleviate some inflation fears if oil doesn't continue to shoot higher.

Euro Zoned

The dollar reversed course Tuesday, moving higher against the euro and other currencies. The euro's weakness was particularly interesting, and it fell more than a half a percent to 1.3899 form above 1.40 earlier in the week.

"It's caught in a tug of war between interest rate expectations and the fear that the sovereign debt issues are coming back. It's hard to say butt we may be getting back to the days when we're trading off of issuance," said Boris Schlossberg of GFT Forex. The euro has been rising on interest rate expectations, particularly after ECB President Jean-Claude Trichet said a rate rise is possible but not certain in April.

Friday marks an important day for the euro zone as leaders meet for a summit where they are expected to agree to a "competitiveness pact," which Germany and France have pushed. The pact is seen as a minor step, and analysts have criticized it for failing to address such issues as debt restructuring.

What to Watch

There is not much economic news expected Wednesday. Wholesale trade for January is released at 10 a.m.

The Treasury auctions $21 billion in reopened 10 year notes at 1 p.m. Bond yields rose Tuesday, with the 10-year rising to 3.55 percent. Except for February, "this might prove one of the highest yield offerings since April or May of last year," said Ian Lyngen, senior Treasury strategist at CRT Capital. The 10-year was yielding 3.665 at February's auction.

ECB President - European Markets Want a Hawk in the ECB Nest - CNBC

One month after Bundesbank president Axel Weber announced he was stepping down, saying goodbye to his chances of running the European Central Bank, many in the markets miss him already.

It will be a tough job to step into Jean-Claude Trichet's shoes, as the current head of the ECB seems to rule the central bank with an iron fist in a velvet glove, combining a stern attitude with undeniable charm and nearly flawless communication skills.

Axel Weber was seen as a natural successor, not only because he is a German – and Germany has by far the biggest pockets in the euro zone – but also because of his hawkish stance in times when many fear that inflation is around the corner.

"After the withdrawal of Axel Weber as candidate, that has thrown the cat among the pigeons in terms of who will be the new ECB head," Michael Derks, chief strategist at FxPro, told CNBC.com.

"It is essential for the ECB to have a strong leader this time around. Germany had found that candidate in Axel Weber," Derks added.

Trichet's mandate runs out at the end of October and European heads of state and government must make a decision on his successor over the coming months.

"The market is still a little bit unsure whether it (the race for the ECB presidency) matters or not," Deutsche Bank chief international economist Stefan Schneider told CNBC.com.

Does the Top Dog Matter?

The members of the ECB Governing Council are all independent thinkers, "the top dog shouldn't matter that much," Schneider said.

But Jane Foley, a senior currency strategist at Rabobank, said both the race and Weber's withdrawal are very significant.

"The risk is now that the next member is not going to be the hawk we had grown accustomed to," Foley said.

European markets would be more reassured if the frontrunner would be German, or Dutch, somebody who could ensure that there is not going to be much of a change in the central bank's policy, she explained.

"I would expect that the ECB will remain hawkish," Foley said, adding that because the euro zone's central bank's mandate is fighting inflation the new president will have to follow that mandate.

But that mandate has come under increased pressure since last year, when the debt crisis struck the euro zone, forcing Greece and then Ireland to ask for a bailout and the ECB to do something it loathes to do: buy government bonds.

The ECB's Securities Markets Program was created to ensure stability in financial markets and the central bank sterilizes bond purchases, therefore – in theory at least – not printing money.

It is this program that was one of the main reasons Axel Weber stepped down and there have been other signs that the central bank's independence has been threatened, Derks said.

"European politicians have been raising their expectations about what the ECB can deliver," he said. "Ultimately, they (the ECB) didn't want to be in a position where they're buying bonds."

What is needed is another strong candidate who holds the same views as Weber but who is able to build consensus, according to Derks.

Candidates

At the moment, the frontrunner in the race seems to be Mario Draghi, the head of Italy's central bank the chairman of the Financial Stability Board. But Italy's high debt is seen as a disadvantage for Draghi's bid by some in the market, who fear he may be biased towards more lenience for weaker, periphery countries.

"I cannot see him looking at Southern Europe's needs and ignoring the rest," Schneider said about Draghi.

The Italian, who worked for Goldman Sachs [GS 159.15 -1.85 (-1.15%) ], has first-hand expertise in financial markets, a good understanding of economy and monetary policy and of "how the political machine works," he added.

A close second seems to come Erkki Liikanen, the head of the Finnish central bank and Finland's former finance minister.

Liikanen "might be a good compromise candidate," as someone from a Nordic country – but not a German, Derks said.

One disadvantage noted by the press is that Liikanen comes from a small euro-zone member state.

Other names have been mentioned, such as Yves Mersh, the head of the Luxembourg central bank, Klaus Regling, who runs the European Financial Stability Facility, Juergen Stark, the head of the ECB's economics unit, and Nout Wellink, the head of the Dutch central bank.

"Whoever takes that job has to be a very good politician," Foley said.

None of the existing candidates seems to be a strong figure after Weber's departure, and "perhaps what is needed is another candidate from another country that holds the same views but is able to build consensus," Derks said.

"It is certainly possible that another candidate might emerge. The stronger candidates do not always emerge early in the running," he said.

Stocks & Investing - Tuesday Look Ahead: More Bumps Seen for Stocks - CNBC

Rising oil continues to trip up stocks, and the S&P 500 could take another run at the psychologically important 1300 level, while the situation shakes out.

The Dow tumbled 79 points, or 0.7 percent Monday to 12,090, and the S&P 500 fell 11 to 1310, but the market finished above its lows.

Oil rose $1.02 per barrel, and was as high as $106.95 before settling down to $105.44. Speculation and rumors continue to rule the oil market, with all types of stories making the rounds about Libya, its oil facilities and Muammar Gaddafi during a volatile trading day. Late in the day, the Financial Times reported that OPEC members are rushing to add output, in a quiet move by Kuwait, the UAE and Nigeria to ramp up production by as much as 300,000 barrels a day. Saudi Arabia is boosting output by 700,000.

There is little in the way of economic news Tuesday, and traders across markets are keeping a close watch on the Middle East and oil prices. The NFIB small business survey is released at 7:30 a.m., and the Treasury auctions $32 billion in 3-year notes.

"The market just keeps banging around based on things coming out of the Middle East," said Jefferies Treasury strategist John Spinello. Bond prices fell, and yields, which move inversely, edged higher but the market was tied like a tether to the stock market. The 10-year yield rose to 3.501 percent.

Spinello said the big auction is on Wednesday when the government auctions $21 billion in reopened 10-year notes, and yields could move higher Tuesday ahead of it. "I don't like any 10-year notes for trading purposes or even investment purchases, anywhere near 3.50. I think they'd have to come in at 3.60 or better," he said.

Stocks Monday saw buyers in the defensive utilities sector, and the selling was thickest in materials, off 1.8 percent and tech, down 1.4 percent. Consumer discretionary stocks also were under pressure.

"We had a very lengthy time of a nothing but a straight up market, so consolidation like this is long overdue," said Steve Massocca of Wedbush Securities.

"We're still pretty well up for the year," he said, noting the last pull back ran for most of the month of November. "This started on the 18th of February. Here we are on the seventh of March. If it's the equivalent of the last correction we had, it's got another week to run. We still haven't broken below that low we made on the 24th of February, of 1294 (on the S&P). The March second low of 1302, we challenged that."

Massocca said he expects the market to go lower, before higher. "First we need to break 1300, then we need to break 1294 to sort of be trading some new lows here. I think we're going to go sideways to slightly lower. I still think we get back to 1275. That would be a nice healthy correction and then we go back up," he said.

Oil is a wild card in the mix, as is the uncertain outlook for the Middle East, where violence has escalated in Libya and investors continue to be uneasy about Saudi Arabia. "$105 oil is not a vitamin pill for stocks, so I'm not surprised this is happening," he said of the stock market's volatility.

Strategas' Jason Trennert said he thinks the selling is temporary. "My own view is it is not a show stopper — oil prices and gasoline prices at the current levels and that's mainly because I think we're at the fat part of the curve as far as employment growth, profit growth and profit margins go. All these things are going to contribute to a much stronger economy this year," said Trennert.

"As it stands now, my own view is I am a buyer of stocks on weakness because I think the fundamentals are going to overwhelm higher oil prices we've seen in the short term," said Trennert.

Economists have been watching the surge in oil, with an eye to its potential impact on the economy. Goldman Sachs economists, in a report, noted they currently expect only moderate effects from oil prices on GDP. Impact is most likely to be felt later in 2011, and in 2012, they note.

Gasoline prices at the pump surged last week to a national average of $3.52 a gallon, the EIA said Monday. Thats a $0.33 gain in the past two weeks and the second biggest jump in a two week period ever.

"People have lost sight of this disruption (in Libya) is a little more than one percent of the oil market that's been disrupted, and there's more than adequate spare capacity around and inventories are high," said CERA Chairman Daniel Yergin.

"Cushing, Okla. (delivery point) is overflowing with oil. There's no shortage," he said. The White House, meanwhile, has been talking about using the strategic petroleum reserve to alleviate pressure on prices.

"It wouldn't relieve the pressure in the market because this is driven by momentum and uncertainty over what else would happen. Lack of clarity about Libya, uncertainty about what else could happen and a very obvious momentum," he said. Yergin said gasoline prices, topping $4 a gallon now in California, should not push much higher if the situation is contained in Libya.

"This is really a Southern European problem, and the companies there believe it can be efficiently managed," he said.

"This is a disruption, but it's less than hurricanes Katrina and Rita, when the supplies were very tight," he said of gasoline prices.

The 30th annual CERAWeek, a gathering of energy executives, oil ministers and government officials, is underway this week in Houston. CEOs from BP [BP 48.15 -0.41 (-0.84%) ] and Total [TOT 60.79 -0.80 (-1.3%) ] will attend, as will the Alergian and Mexican oil ministers.

There is also a Bank of America investor day Tuesday, and Toyota [TM 89.02 -1.97 (-2.17%) ] was to make a major announcement overnight on steps it will take toward recovery. President Akio Toyoda is expected to lay out his vision.

Treasury Secretary Tim Geithner meets Tuesday with European Central Bank President Jean Claude Trichet in Europe. He will also meet outgoing German Bundesbank head Axel Weber in closed door meetings.

Oil & Gas: OPEC Members Rush to Raise Oil Output - CNBC

Influential members of OPEC, the oil cartel, are joining Saudi Arabia in raising output to cool soaring prices and allay fears of a supply crunch in the west.

The behind-the-scenes move by Kuwait, the United Arab Emirates and Nigeria reflects growing unease among OPEC members over the threat to the global economic recovery from crude’s runaway rise amid the worsening crisis in Libya.

U.S. oil prices increased to their highest levels since September 2008 on Monday, trading at an intraday high of $106.95 a barrel [CLCV1 105.19 -0.25 (-0.24%) ], as Brent [LCOCV1 114.97 -0.07 (-0.06%) ], the European benchmark, hit a session high of $118.50. Gold jumped to a fresh record of $1,444 an ounce [XAU= 1432.60 1.86 (+0.13%)].

Industry officials said the production increase, expected by early April, would — together with an earlier rise by Saudi Arabia — almost make up the shortfall in supply from falling Libyan crude exports.

They said that Kuwait, the UAE and Nigeria were to ramp up their production by as much as 300,000 barrels a day in coming weeks. Riyadh has raised its output by about 700,000 b/d. The surge in output is the result of both a policy decision that reduces the need for an emergency OPEC meeting and oilfields coming back into production after maintenance.

The International Energy Agency, the western countries’ oil watchdog, estimates Libya’s oil production has fallen by about 1m b/d, down two-thirds from a prevailing output level of 1.58m b/d before the start of the crisis three weeks ago.

In Libya, troops loyal to Muammer Gaddafi battled with rebel forces outside the Ras Lanuf oil terminal and launched a number of air strikes on Monday, continuing a counter-offensive to prevent the rebels’ advance west.

Traders voiced fears that the fighting was turning into a civil war.

“The oil markets are pricing in an extended Libyan shutdown of crude exports,” said Michael Wittner, head of oil research at Société Générale.

The OPEC cartel, which controls 40 percent of global oil supplies, is divided about the need to increase output.

While Saudi Arabia has responded quickly by pumping more oil and some members are now quietly following, others including Iran and Algeria oppose an increase and see no shortage of oil in the market.

“OPEC is evaluating whether [it] needs to meet or not,” Qatar’s oil minister, Mohammed Saleh al-Sada, told reporters in Doha. The cartel has been debating in recent days whether to call an emergency meeting but has so far decided against it, officials said. Riyadh is pumping about 9.2m-9.3m b/d, after raising production by 700,000 b/d, according to a senior western oil official.

Other officials said Kuwait and the UAE were boosting output jointly by about 100,000-150,000 b/d in the next few weeks. Nigeria is set to add another 150,000-200,000 b/d in April with the return from maintenance of the Qua Iboe and Bonga oil fields, which produce high quality oil.

CNBC's Fast Money: Scary Chart: Bottom About to Fall Out of the Dollar? - CNBC

The Dollar Index, a trade-weighted benchmark of the greenback versus six other currencies, put in significant bottoms in early 2008, late 2009 and late 2010, forming a rock solid trend line that are exactly the kind of support that chart analysts look for in a bullish security.

But after a violent move lower this year, the index is threatening to break that trend line at the 76.20 on the index, alarming technical analysts everywhere.

A daily close below $76.20 “would signal a significant shift in sentiment is underway from bullish to bearish,” said George Davis, Chief technical Analyst at RBC Dominion Securities, in a special report to clients Monday. “This development would also produce a bearish medium to long-term trend reversal for the DXY [DXY Unavailable () ].”

The PowerShares DB U.S. Dollar Index Fund [UUP 21.96 0.025 (+0.11%) ], the ETF that tracks the index, uses futures to pit the dollar against the euro (largest component at 57.6 percent), the Japanese yen (13.6 percent), the British Pound (11.9 percent), the Canadian dollar (9.1 percent), the Swedish krona (4.2 percent) and the Swiss franc (3.6 percent).

The dollar is “hovering just above well-defined lows and toying with the prospects of a break below said lows,” wrote Carter Worth, Chief Market Technician at Oppenheimer Asset Management, in a note Monday. “Not good. SELL.”

So the technical analysts, who make buying and selling decisions based mostly on price movements, have trading floors thoroughly spooked. But what are the charts telling us about the fundamentals?

Last week, Federal Reserve Chairman Ben Bernanke reiterated his commitment to buying $600 billion in Treasurys to effectively keep the benchmark U.S. interest rate in essentially NEGATIVE territory.

That same week, European Central Bank President Jean-Claude Trichet shocked the market by saying a rate increase was possible next month. The Euro [EUR=X 1.3966 -0.0002 (-0.01%) ] hit a 4-month high versus the dollar today.

“Bernanke's testimony last week clinched the continued decline in the US dollar at the same time Trichet expressed what it means to be a prudent central banker,” said Peter Boockvar, equity strategist at Miller Tabak.

Boockvar and others believe that Bernanke is making the mistake of focusing on core inflation, which excludes food and energy costs because they historically have been very volatile. But at this moment in time, commodities have not been volatile, they’ve gone straight up. Brent crude oil crossed above $106 and silver hit a 30-year high on Monday. The ECB’s consumer price index comes out next week.

Interest rates determine currency fluctuations, as investment will flow into the countries with the highest rates of return. That reality has awakened some in Bernanke’s own circle. Dallas Fed President Richard Fisher Monday was among the most recent policy officials to signal that a completion of Bernanke’s full quantitative easing program may not be necessary.

The other reasons traders are fundamentally bearish on the dollar is its failure to act as a safe haven during the uprisings in the Middle East and North Africa. The DB PowerShares ETF (UUP) is down 2 percent over the last month as the events in Tunisia, Egypt and Libya began to unfold.

“The dollar not asserting itself during a period of turmoil in the Middle East is hugely worrisome,” said Scott Nations, President of NationsShares, a division of Fortress Trading. “Europe is going to raise rates before we do and China is already there. Both are bearish for the dollar. I'm watching this 22 level in the dollar ETF.”

Hedge funds are betting collectively against the dollar with the fervor of their currency trading legend George Soros. Figures from the CME, first reported by the Financial Times today, show that there is $39 billion net short the dollar, above the previous record of $36 billion in 2007 on the precipice of the financial crisis.

“We expect a bounce against our short position, but have no intention of making any adjustment on the first bounce as we believe there is significant downside potential in the dollar from current levels,” said Adam Grimes, director of tactical investments at Waverly Advisors, which sells its research to hedge funds. “In light of Trichet’s comments, expectations for a subsequent rate hike are now starting to get baked into the market.”

To be sure, several brave traders are using this level to get back into the dollar in a bet that it will continue to hold the line. They believe the ECB will raise rates too early, derailing their fragile recovery and causing a flight back to the safety of the dollar. And even some bears on the dollar don’t see what’s so scary about a falling currency.

“Why is a weak dollar so bad?” asks Michael Block, Chief Equities Strategist at Phoenix Partners Group. “It is a great boost for manufacturing and could be a great boost for U.S. industrials” selling their products overseas at cheaper prices.

The problem, this time, is that a plunging dollar could throw fuel on the rally in commodities priced in dollars. This will aggressively raise input costs for companies from General Mills [GIS 36.79 0.03 (+0.08%) ] to Walmart [WMT 52.02 -0.05 (-0.1%) ], hit U.S. consumers with higher gasoline prices and cause more social unrest in even more parts of the world.

“The dollar will plunge against most other currencies, which will send prices increasing at a much faster rate than what has been experienced recently,” said Peter Schiff, President of Euro Pacific Capital. “So if you think oil and food prices are rising fast now, you haven't seen anything yet.”